FTC acts on disclosure of resort fees


The Consumer Travel Alliance, Business Travel Coalition and Ed Perkins, an independent travel advocate, petitioned the FTC last August to take action regarding clarification of mandatory resort fees and rule that they be included in the price of hotels that charge such fees.

Today, the Federal Trade Commission (FTC) took the government’s first action. They sent letters to 22 property groups noting, “that their online reservation sites may violate the law by providing a deceptively low estimate of what consumers can expect to pay for their hotel rooms.”

This may turn out to be one of the most important hotel stories of the year. The FTC action is unprecedented.

The warning letters cited consumer complaints that surfaced at a recent conference the FTC held on “drip pricing,” a pricing technique in which firms advertise only part of a product’s price and reveal other charges as the customer goes through the buying process. According to the FTC letters, “One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or Internet access, sometimes referred to as ‘resort fees.’ These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions.” The warning letters also state that consumers often did not know they would be required to pay resort fees in addition to the quoted hotel rate.

“Consumers are entitled to know in advance the total cost of their hotel stays,” said Federal Trade Commission Chairman Jon Leibowitz. “So-called ‘drip pricing’ charges, sometimes portrayed as ‘convenience’ or ‘service’ fees, are anything but convenient, and businesses that hide them are doing a huge disservice to American consumers.”

If the FTC follows through on these written instructions, some of the most egregious incidents of hidden resort fees will be eliminated for consumers.

In the trio’s letter to Chairman Liebowitz, they noted:

Drip pricing is a deception scheme whereby a supplier carves out a portion of its true price; labels that portion as a mandatory extra fee or charge; deducts it from the true price; and features the artificially reduced remainder of the true price in advertising, online postings and price information supplied to global distributions systems and travel agencies. Typical carve-outs include “resort,” “housekeeping,” and “Internet access” fees; however, there are others. “Often,” notes BTC’s Mitchell, “buyers never find out about the amount of the fees until they arrive at the hotel or resort.”

“There’s no question that the practice is deceptive,” says Perkins. “The Florida Attorney General described it as ‘inherently deceptive’ in a comparable action against cruiselines in 1997.” The US Department of Transportation agrees: It quickly quashed the practice some airlines adopted when they started carving “fuel surcharges” out of their base fares.

“Anytime consumers are faced with hidden fees, the practice is deceptive. When travel providers are planning to add extra charges, they must clearly disclose any such fees,” stated Consumer Travel Alliance Director Charlie Leocha.

The Consumer Travel Alliance has forwarded this FTC finding to the Department of Transportation, which is crafting a proposed rulemaking regarding the disclosure of airline fees. There are many parallels to these actions.

This is the kind of disclosure that will prevent consumers from discovering by surprise additional fees beyond what they thought they had to pay after purchasing a vacation from a traditional travel agent or online agency.

It is only fair that consumers know the full cost of travel, whether when reserving a hotel room at a resort or taking a flight across the country.

DOT is expected to publish its notice of proposed rulemaking early next year, probably in February or early March, that will cover the disclosure of ancillary fees charged by airlines and not reflected in their airfares.

Photo: Marriott San Juan Resort and Stellaris Casino

About Perkins
Consumers Union named long-time consumer advocate Ed Perkins to be editor when it launched Consumer Reports Travel Letter in 1984, where he remained until retirement in 1998. He continues to address consumer issues in travel as a syndicated columnist.

About Mitchell
Kevin Mitchell founded the Business Travel Coalition in 1994 to interpret industry and government policies and practices and provide a platform so that the managed travel community can influence issues of strategic importance to their organizations.

About Leocha
Charlie Leocha leads the Consumer Travel Alliance, a DC-based, non-partisan and non-profit organization established to improve the consumer experience in the universe of travel. CTA is recognized as an expert in consumer travel issues and its media, education and advocacy work spans all areas of travel.